Looking to incorporate or expand your business to Singapore? Depending on your business objectives, here are some options that you can consider. This article compares the three types of business entities available for foreign companies.
Singapore’s reputation as a strategic gateway to South East Asia makes it an attractive hub for foreign companies to establish or consolidate their business in the region.
If you’re a non-Singaporean looking to set up your company in Singapore, it may be worthwhile to look into engaging the services of a professional firm to register your company in Singapore. In the meantime, here are are three company setup options that are available to foreign companies:
A subsidiary company is a locally incorporated private limited company and the majority shareholder is another local or foreign company.
In Singapore, companies can be fully foreign-owned, which allows foreign companies to incorporate a subsidiary company and own 100% of its shares.
Under Singaporean law, a subsidiary company is considered as a separate entity (from its foreign parent company) and is treated as a local Singapore company. Thus, the foreign company and its assets cannot be held for the debts and liabilities of the subsidiary.
A properly structured local subsidiary company is also an excellent tax-efficient corporate body. The resident status of a subsidiary company makes it eligible for favourable tax treaties, availing government incentives, and easier access to local funds.
Companies or individuals are generally advised to set up a subsidiary company if they are running a small to medium-sized business.
Here are some things to take note when setting up a subsidiary company:
- The name for the subsidiary company can be different from that of the parent company. However, this is subject to approval by Singapore’s Accounting and Corporate Regulatory Authority (ACRA).
- The Singapore Companies Act requires the appointment of one or more directors. Among these, at least one director must be a Singapore citizen, permanent resident, or Employment Pass holder.
- A subsidiary company must maintain a registered office address in Singapore and keep its statutory documents in that office.
A Singapore branch office is a registered legal entity which is treated as an extension of the foreign parent company.
Branch offices are allowed to conduct any type of business activity that falls within the scope of its parent company and can repatriate its earnings and capital. Branch offices will only be taxed for the earnings derived from its operations in Singapore.
Branch offices are considered a non-resident entity, which means that the foreign company’s head office will be held liable for any acts of commission or omission committed by the Singapore branch office. The non-resident status of branch offices also excludes them from some of the tax exemptions that local and subsidiary companies enjoy.
Companies or individuals are generally advised to register a branch office if they are running a medium to large-sized business that has specialised operations in international locations, and intend to conduct a wide range of business activities in Singapore.
Here are some things to take note of when setting up a branch office:
- The name of the Singapore branch office must be the same as that of the head office and pre-approved first before registration.
- The Singapore Companies Act requires branch offices to appoint at least 1 authorised representative, who is a Singapore resident, to accept services of process and notices.
- A branch office must have a registered office address in Singapore.
A representative office is a temporary setup which enables foreign companies to explore the market or manage company affairs in Singapore without conducting any profitable business activity.
Representative offices do not have any legal personas. Thus, representative offices cannot sign contracts, trade, lease warehouses, raise invoices, or open letters of credit – either directly, or on behalf of their foreign parent companies. Foreign companies bear implicit liability for the activities of their representative offices in Singapore.
Companies or individuals are generally advised to set up a representative office if their main objective is to study the Singapore business environment before committing any form of investment or if they have considerable non-core activities to be managed in Singapore.
Here are some things to take note when starting a representative office:
- A representative office must be staffed by a representative from the foreign company’s head office.
- Representative offices can hire no more than five local support staff.
- A representative office cannot continue its operations beyond three years and must upgrade itself to a branch office or subsidiary company by the end of that period.
- If your representative office operates in the banking, finance or insurance sectors, you need to register your representative office with the Monetary Authority of Singapore (MAS). For representative offices in other industries, you’ll need to register with International Enterprise Singapore (IE Singapore).
Need advice on the best structure for your business? Crystal Clear helps entrepreneurs and international businesses make the right choices when setting up in Singapore. Reach out to schedule a call with one of our advisors!